The IRS has reminded taxpayers they have options when it comes to paying their taxes, including options for taxpayers who can’t pay their taxes in full.
Paying taxes electronically. The IRS reminds taxpayers there are several ways to pay taxes electronically.
IRS Direct pay. IRS Direct Pay is a free service that allows individual taxpayers to pay their taxes online directly from a checking or savings account. Taxpayers using IRS Direct Pay receive an email confirmation of their payments.
EFTPS. Both business taxpayers and individuals can use the Electronic Federal Tax Payment System, or EFTPS, which is a free service that is available online or by phone 24 hours a day 7 days a week. Like IRS Direct Pay, EFTPS allows taxpayers to pay their taxes online directly from a checking or savings account. Unlike IRS Direct Pay, EFTPS requires enrollment, which can take up to five business days. But once enrolled, taxpayers can make up to five payments per day, schedule payments up to 365 days in advance and receive email notifications about their payments.
IRS2Go. IRS2go is a mobile phone app that allows taxpayers to access electronic payment options, including IRS Direct Pay, using their mobile phone.
Return filing software. Taxpayers, whether filing their own returns electronically or using a tax return preparer, can pay any tax due on those returns using the tax return software they use to file the returns.
Payment processors. Taxpayers can pay their taxes electronically through a payment processor using a credit card, debit card or digital wallet. There is a limit on the number of tax payments a taxpayer can make using a credit card, etc., and processing fees, which go to the payment processor, apply.
Non-electronic options for paying taxes. For taxpayers who don’t want to, or can’t, pay their taxes electronically, the IRS also has several options.
Personal check, money order or cashier’s check. Individual taxpayers who want to pay their 2019 income tax liability using a personal check, money order or cashier’s check should include, on the memo line of their payment, the last four digits of their Social Security number and the phrase “2019 Form 1040.”
The payment should be mailed, along with Form 1040-V, Payment Voucher, to the payment address listed for their state of residence, which can be found here.
Individual taxpayers making 2020 estimated tax payments by check, money order, or cashier’s check should include 2020 Form 1040-ES, Estimated Payment, for the appropriate quarter with the payment and mail it to the payment address listed for their state of residence, which can be found here.
Cash. Individuals and businesses that prefer to pay their taxes in cash, can do so at participating retail stores. There is a $1,000 payment limit per day and a $3.99 per payment fee. Taxpayers can find the list of participating retail stores here.
Options for taxpayers who can’t pay their taxes in full. The IRS also has payment options for taxpayers who can’t pay their taxes in full, including installment agreements and offers in compromise.
Installment agreements. Under Code Sec. 6159(a), the IRS may enter into written agreements with delinquent taxpayers under which such taxpayers may pay their taxes in installments. (installment agreement or payment plan). Qualified taxpayers who would like to enter into a payment plan with the IRS may use the Online Payment Agreement (OPA) tool.
Qualified taxpayers are individuals who owe $50,000 or less in combined income tax, penalties, and interest and have “filed all their tax returns;” and businesses that owe $25,000 or less in combined payroll tax, penalties and interest and have “filed all their tax returns.”
The OPA tool allows taxpayers to apply for a short-term (full payment in 120 days or less) or long-term payment plan and provides a direct debit payment option.
The IRS does not charge a fee for setting up a short-term payment plan through the OPA. The minimum fee for a long-term payment plan set up through OPA is $31, which can be waived for low-income taxpayers. For more information about, and access to, the OPA tool, taxpayers should go to IRS.gov/opa.
Taxpayers who don’t qualify for, or don’t want to use, the OPA tool can apply for a payment plan by phone or by submitting Form 9465, Installment Agreement Request, by mail. The IRS generally charges higher fees for requesting a long-term payment plan by phone or mail.
Currently not collectible status. Taxpayers who can’t pay their taxes because to do so would cause a financial hardship should contact the IRS to request that their tax account be placed in currently not collectible (CNC) status, which status suspends IRS collection activity against the taxpayer until the taxpayer’s financial condition improves. Taxpayers should note that interest and penalties continue to accrue while the taxpayer’s account is CNC until the tax debt is paid in full.
Offer in Compromise. The Code also gives the IRS the authority to compromise a taxpayer’s tax liability. (Code Sec. 7122(a)) An offer in compromise (OIC) is a agreement between a taxpayer and the IRS that compromises a taxpayer’s tax debt for less than the full amount owed. Taxpayers who want to pursue an OIC should use the Offer in Compromise Pre-Qualifier tool to see if they qualify for an OIC before submitting Form 656, Offer in Compromise, to the IRS.
Source: Thompson Reuters 7-13-20